President Xanana Gusmao vetoed the East Timorese government's
tax-hiking fiscal bill Friday, in his second clash this month with Prime
Minister Mari Alkatiri over financial and economic policies.

Gusmao announced his veto in a nationally broadcast radio address,
justifying his decision with what he said were "contradictions"
in government policies of simultaneously seeking to boost tax revenues and
to bolster economic activity by attracting investors.

There was no immediate official reaction from the government.

But leaders of Alkatiri's Fretilin party, which holds 55 seats in the
88-member legislature, told Lusa it was unlikely the government or
parliament would substantially alter the bill.

Jacob Fernandes, the acting speaker, said Gusmao's veto was, itself,
"contradictory", as it was intimately linked to the government's
budget that the president signed two weeks ago.

Gusmao held the budget back for two weeks before promulgation,
criticizing Alkatiri for having used his legislative majority to speed its
approval in parliament with limited debate.

The fiscal bill, approved earlier this month by parliament, unfairly
penalized the least privileged sectors of society and was frightening away
foreign investors, Gusmao said in his speech.

He suggested belt-tightening measures to limit the need for higher
taxes, such as reducing the planned purchase of a fleet of government
vehicles.

"It is not my intention to push the government into a
ravine", he said, adding that his only intention in vetoing the bill
was to "motivate discussion" and help build a "strong and
capable civil society".

Analysts in Dili underlined what they said was a lack of regular
communication between the president and prime minister of the 10-week- old
independent nation.

On running for president in April elections - which he won with more
than 80 percent of the vote, Gusmao rejected the offered backing of
Alkatiri's dominant Fretilin party, which he once led.

He indicated at that time that he wanted to be a political
counter-weight to aid democratic development.

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